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Mortgage stress: What it is, and how to avoid it

http://mastermortgagebrokersydney.com.au - note spelling out how to avoid mortgage stress - stress is spelled in dramatic red letters

You might be comfortable paying off your mortgage now, but what if things change? Here are some tips on how to avoid a mortgage stress fracture.

http://mastermortgagebrokersydney.com.au - note spelling out how to avoid mortgage stress - stress is spelled in dramatic red lettersPaying off a mortgage is one of the biggest financial challenges you and your family will ever tackle.

And it isn’t easy – mortgage repayments take up about one-quarter of a family’s income on average, according to the Australian Bureau of Statistics’ 2016 Census.

While most families manage, what happens if your circumstances change?

An unexpected redundancy, relationship breakdown, illness or accident can dramatically impact your ability to make your payments and put you in mortgage stress.

But first, what is mortgage stress?

While there isn’t a technical definition for the term, mortgage stress is generally considered to occur when a person or family is spending 30% or more of their income on home loan repayments.

There are also a range of other criteria which would suggest you’re experience mortgage stress.

If you’re paying only the interest on your home loan, borrowing money from family, or having difficulty paying your bills, then you might be experiencing mortgage stress.

I don’t have a problem now, why worry?

It’s unwise to assume your circumstances will never change. An accident or illness can befall a person at any time, and the impact on your finances can be devastating.

An increase in interest rates can also have a significant impact on your mortgage repayments. A simple 0.25% rate hike can increase repayments on the average Australian loan ($375,000) by about $50 a month.

Over the course of a year – and with a potential of further rate hikes – this can really chew into your disposable income.

Ok, so how can I avoid it?

The smart borrower won’t wait for their circumstances to change, they’ll start planning now to make sure they can weather a storm if it hits.

Steps you can take to reduce your risk include:

Step 1: Use a mortgage calculator to see what your repayments would will look like if there was a rate increase. Would you be able to keep up?

Step 2: Review your current income and expenses, and make a new family budget. Use it to track where your money is going and where savings can be made, so you can either pay off your mortgage sooner or get by if things go awry.

Step 3: If you’re worried about your mortgage, or concerned about the impact of a future rate hike, come pay us a visit.

We can talk to you about your situation and help you make a plan to ensure a small problem doesn’t become a big one.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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Parents as guarantors: end your child’s first home mirage

mortgage brokers - man wandering in the desert

They grow up so fast. One minute they’re nagging you for a dollhouse, the next, it’s for help buying a two bedroom unit in an up-and-coming suburb. If you always find it hard to say ‘no’ to your kids, here’s how to say ‘yes’ the right way.

mortgage brokers - man wandering in the desertYou’ve probably heard your children complain about how hard it is to crack into today’s property market.

And smashed-avocado shenanigans aside, they do have a point. It is tougher nowadays.

With the property market constantly on the up-and-up, reaching that 10% to 20% deposit can feel like a mirage for your child.

The good news is that you can help them obtain that slightly out-of-reach home loan by using the equity in your property.

How it works

Banks find it risky to lend to borrowers who have an unstable job or low deposit. But they do allow seemingly more-reliable immediate family members to guarantee a home loan.

Guarantor loans have huge benefits for your children, including:

No deposit required: If guaranteed against a parent’s property equity, your child may be entitled to borrow 100% to 110% of the purchase price of a property. That means no deposit is required. Instead, your child can focus their savings on white goods and repayments.

Discounted interest rates: Guarantor loans can come with reduced interest rates and we can help you secure a great deal.

No Lenders Mortgage Insurance (LMI): Your child will likely not need to get LMI because the equity is usually enough of a guarantee to protect the lender against losses.

Things parents should keep in mind

Sounds great, right? But it’s not entirely without its risks. Here’s what you as a parent need to keep in mind:

Safeguard your credit report: Be sure that you can honour the repayments in case things go awry and your child is unable to pay. You should be positive that they will uphold their end of the bargain, but also prepare for the unexpected.

Financial risk versus emotional benefits: Going guarantor makes you financially responsible if your child defaults on payments. The emotional benefits, however, can outweigh the risk.

Impacts on your borrowing capacity: Future credit providers will take into account the guaranteed loan. They will assess your borrowing capacity based on it, and whether or not you are an active participator in the repayments of your child’s mortgage.

How we can help

We understand that when it comes to your children, it can be near-impossible to take your emotions out of decision making. That’s where we come in.

We can help you calculate whether or not you have the equity to make this work, and assess your child’s financial capabilities to see if they’re in a position to be making repayments.

We’ll also help you understand your legal liability as a guarantor before helping you make the big decision. So give us a call today.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Negotiating a settlement period

loan broker - hands shaking across a business desk

In a perfect world you select a property to buy, complete with white picket fence, and the settlement goes through on the agreed date without a hitch. But as we all know, we don’t live in a perfect world.

loan broker - hands shaking across a business deskWhen you buy or sell a property you go through a ‘settlement period’, which is the time designated for the buyer to complete payment of the contract before becoming the owner of the home.

Up until the settlement goes through the home is the property of the existing owner.

And with a large home deposit at stake, you’ll want to ensure you choose the right period length.

How much time should I give myself?

Generally, settlement periods are 30, 42, 60 or 90 days.

In NSW a 42 day settlement period is the most common, but in most other places around the country it’s 60 days.

Just because it’s common, however, doesn’t mean it’s the best fit for your situation (or the seller’s).

You see, both the buyer and the seller must agree on the settlement period.

However, you may have competing motivations, so this can be tricky.

Whatever the case, just make sure you allow yourself enough time for conveyancing, bank financing approval, organising the move, undertaking requested repairs for the buyer, and negotiating settlements for your other property interests.

Also, keep in mind that if you buy the property at an auction, there will already be a settlement date indicated in the contract.

If you can’t meet that date, chat to the selling agent before signing on the dotted line to see if another date is agreeable.

You might push for a longer settlement period if:

– If you’re the seller and you’re still looking for a property to purchase
– If you’re a buyer and you haven’t yet sold your own home
– You’re selling and the buyer has requested you repair something
– If you have an upcoming event that you want to deal with first (wedding, big overseas trip, etc)
– Someone is going guarantor on the loan or you’re purchasing through a family trust
– You’re buying off the plan, as the scheme has to be registered with the titles office
– You need to save more money as a buffer (especially if you’re upgrading or will be renovating).

You might push for a shorter settlement period when:

– You’re a seller who has already found another home
– You’re a buyer who has already sold your current home and needs to move quickly
– A holiday period or big event is coming up and you’re keen to move in beforehand
– You’d like to undertake work on the property sooner rather than later
– You need cash flow.

It’s important to get right

One-in-five property settlements in Australia are delayed by about one week so it’s important to give yourself a comfortable buffer.

While each party can request a settlement extension if a delay occurs, that doesn’t mean the other party has to agree.

This is where it gets a little tricky. Each state and territory has different laws, and every contract differs.

Queensland’s laws are probably the most stringent. For example, either the buyer or the seller can terminate the contract, sue for damages, and keep/lose their deposit if the other party is not ready to buy on time.

Other states have a little bit more leeway.

In NSW and Tasmania an extra 14 days can be given, in WA and SA buyers are given three days’ grace before penalty interest applies, and in Victoria a seller can immediately start charging a tardy buyer penalty interest.

Final word

So that’s negotiating a settlement period in a nutshell.

The best news? That’s about as much negotiating as you’ll need to do. Because when it comes to negotiating a loan with a lender, we’ve got you covered.

If you’d like to find out more about our services, get in touch, we’d love to help you out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Why you can get a better home loan deal using a mortgage broker

Mortgage broker- playing cards on a poker table

So you’ve found the ideal property and it’s time to source finance? Here’s how to play your cards right and get a great home loan deal sorted before the settlement date.

Mortgage broker- playing cards on a poker tableEducating the kids, wedding planning, plumbing – there are some things in life that are better outsourced to professionals.

Similarly, when you’ve finally found the home of your dreams, and you need to keep ahead of the avalanche of tasks that follow, using the services of a mortgage broker can make the process a lot less overwhelming.

Your three choices

Basically, there are three ways you can go about getting your loan. You can go straight to your bank, you can look for the best deal yourself, or you can seek the help of a mortgage broker.

However, as buying a home is quite likely the biggest single financial transaction that you’ll ever make in your life, it’s important to make the right choice.

1. Going to your bank

For some people, it’s natural to go straight to the bank because that’s what you know and trust and it’s probably what your parents did.

But this can be a mistake. There are dozens of lenders out there who may be offering better deals, and your bank may take advantage of you not shopping around due to your misplaced loyalty to them.

If you have established a good credit history and a steady income, chances are that you’ll still be able to get a good interest rate through a bank. What they can’t and won’t do though is tell you if there is a better deal available elsewhere.

2. Going it alone

You can jump online and start doing loan comparisons yourself. Be aware though, that there are differences in criteria, so it’s not altogether straightforward and online calculators will have built-in assumptions.

You will need to have a good understanding of the industry and a good grip on the terminology.

You’ll also need to understand the implications of loan terms, fixed interest and variable interest options, interest only vs principal and interest, mortgage protection insurance, credit history, and employee vs self-employed status.

Finally, you’ll need to consider redraw options and offset accounts. That’s a lot to weigh up in a short amount of time – especially if you need to source finance quickly.

3. Using a broker

Having a home loan broker is like having a personal shopper who will research and compare hundreds of available market options in search of the best deal for you. We’re also required to hold or operate under an Australian Credit Licence.

A broker will have access to multiple lenders and multiple products, will be able to compare and recommend suitable loan options, negotiate the loan on your behalf, and guide you through from application to settlement.

We also don’t cost any extra. That’s because we’re paid a commission by the lender. Rest assured though, that we’re driven to secure the best possible home loan deal for you.

After all, having you tell family and friends at your house warming party about how we secured you a great home loan is much more valuable to us than slight variations in commissions.

The choice is yours

Any of these three options will get you there, but choosing a mortgage broker like us is likely the best way to be fully informed before you commit to a loan.

We’re happy to answer any questions you have, any time, meaning you don’t have to trawl through pages upon pages of Google to find the correct answer.

It’s also the most stress free way of getting your finance lined up in time, so that the home of your dreams doesn’t get snatched up by someone else!

If you’d like to know more about how we can secure a great home loan for you, get in touch today.

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Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

Home Mortgage Tricks And Tips For Professionals And Newcomers Alike

mortgage brokerThe ability to obtain a mortgage in Australia to purchase a home, investment property or refinance an existing loan is rapidly changing. Up until recently all you had to do was fill out an application with your personal details, provide some documents that verified your income, 100% identification documents and some statements confirming the balances on any liabilities you had.

A lot of people have no idea exactly how mortgage loans function in today’s market, therefore applying for one these days can be a little bit complicated. If you want to understand everything you can about home mortgage loans, then you should check out the article content which comes next. Stay with me in to the subsequent paragraphs to discover a number of helpful ideas and items of wisdom which can help you choose a superior home loan.

They are now asking a lot more questions
Because of regulatory requirements lenders are now forced to check to see if you can really afford the loan amount you are applying for. Up until now when you applied for a mortgage you had to state what your monthly living expenses were. If the amount you stated was in line with The Henderson Poverty Index (HPI) nobody asked any questions even if you were driving a Ferrari and had 3 kids in private school on an $80,000 a year salary.

However, this has all changed and through regulatory pressures lenders are now obliged to take a lot closer look on whether you can afford the mortgage you are asking for.

How do lenders calculate your living expenses? There are two main methods that Australian lenders now use for calculating mortgage applicants living expenses: The Henderson Poverty Index (HPI) and the Household Expenditure Measure (HEM).

The HPI or Henderson Poverty Index
The HPI was the go to expense measurement for most lenders prior to the introduction of the National Consumer Credit Protection (NCCP) act. Nowadays though, it is seldom used. It wasmortgage brokers originally predicated on a survey of 1950’s families living in New York, however for Australian use it had some tweaks made to it to update it for the local market. Basically it’s an index calculated around the expenses of a family that has two adults and two kids, from that base they used fraction multipliers for various family structures to figure out what the expenses would be for different family scenarios.

The HPI and HEM are very much alike if applied to a couple with two kids under eighteen; nonetheless, the HEM isn’t as forgiving as the HPI when it comes to sole parent families and singles.

The HEM is now becoming the method of choice for nearly all lenders in Australia today, because it was created solely centered on Australian living expenditure information, and specifically because it analyses each family type separately.

The (HEM) or Household Expenditure Method
The HEM has now become the method of choice for most lenders when it comes to the two mechanisms and it has been established by using more than 600 regularly used household items from the Australian Bureau of Statistics (ABS) Household Expenditure Survey or (HES). The HEM calculates the median expenditures of the absolute basics that someone would spend their money on (food of course, power bills, personal transport, tv, phones internet, clothing for the family). Added to that is a 25th percentile of all expenses for your discretionary basics, this will include spending on things like eating out, alcohol and childcare. Then there are expenses that are non essential, like holidays overseas or nationally that are left out of the calculations. Mortgage payments and/or rental expenses are also left out of the HEM.

Nevertheless, lenders will insist that loan applicants reveal any expenses they have over and above the HEM’s index. In other words they will drill down to find out exactly what you’re spending your money on and whether or not you have enough money left over to make the mortgage payments you claim you can afford.

Some lenders will even go to the lengths of asking for your latest bank account transaction and credit card statements so they can analyse precisely what your spending habits are.

How to increase your borrowing capacity
Never take on fresh financial debt and also pay back your established financial obligations conscientiously whilst waiting for your home mortgage verdict. As soon as your personal debt is reduced, you’ll be eligible for a more significant home finance loan. Should your personal debt be substantial, the loan request could be turned down. In the event you are approved, your rates of interest will probably be quite high.

You should not spend extravagantly while you wait around for acceptance. An excessive amount of spending may well put up a warning sign to your mortgage provider should they do a further credit assessment a couple of days prior to your appointed getting together. If you have to carry out any significant transactions, hold back until you have signed the settlement documents.

The importance of job security
Your employment track record needs to be comprehensive in order to be eligible for a home loan. Many financiers demand a reliable 2 year employment record so that you can be approved. If you happen to change jobs excessively, you might not be in a position to get yourself a home loan. Never ever give up your employment whenever you make application for a mortgage

Don’t hide
Should you get into difficulty making your moprtgage repayments on time continue to keep talking with the financial institution that carries your home loan in every situation. Ahead of any predicament reaching the foreclosure stage, the intelligent customer understands that it truly is worth trying to create alternative arrangements with the lender. Give them a call and consult with them concerning your problems, and find out exactly what they are able to do.

The cash you will need
Chances are your mortgage company will demand a deposit. A number of financial institutions would once say yes to mortgages with out a deposit in advance, but that’s incredibly uncommonbest mortgage broker nowadays. Prior to going forward with any application form, always ask what the deposit is likely to be.

Just before you make an attempt to find a new home loan, check to see if property values have gone down. Get a property valuation ahead of re-financing your home loan to make sure you have sufficient home equity to really make the procedure advisable.

One size does not fit all
Figure out which kind of mortgage loan you must have. There are many differing types of mortgage loans. There are various time frames, a variety of repayment plans and a varying range of loan rates. You should educate yourself on the advantages and disadvantages of each one. The ideal individual to check this out with this is your mortgage broker. The mortgage broker can easily show you all your possible choices across a full range of mortgage providers.

Lenders to avoid
Be vigilant for mortgage companies who aren’t dependable. Undesirable mortgage loan techniques can easily wind up costing you a ton of money.
Steer clear of slick talkers or loan merchants who choose to talk fairly quickly in order to try and trick you. Should the interest rates seem to be too high, be sure you do not sign-up to anything. Under no circumstances trust someone who claims your less-than-perfect credit just isn’t a problem. Last but not least, under no circumstances tell a lie on any credit application, and steer clear of any loan providers who try to advise you otherwise.

Don’t be blind to fees and charges
Make certtain that you find out what all of the mortgage loan service fees and other associated costs will be prior to you signing a home mortgage loan contract. You’ll certainly be expected to pay out settlement costs, possible commission costs along with other service fees.

Lending products with a variable rate of interest should be considered carefully. Because, as the economic climate adjusts, the interest rate of your mortgage can change at the same time and it could set you back a great deal more when it comes to interest charges. This may lead you to be unable to keep up your repayments.

When was the last time you looked at your credit report?

risk form document loan business market concept – stock image

A favorable credit record is essential to obtaining a favourable home loan. Find out what your credit score is. Deal with any errors against your credit report, as well as do your very best to enhance your own credit score. Consolidate all of your personal debt into just one personal loan using the most competitive interest rate you are able to get, not to mention pay it religously on time each and every month.

If need be, clean up your credit history prior to looking for a new home loan. In order to get qualified to apply for any mortgage loan in today’s world you’ll require good credit. Loan providers have to know you’ll pay your debts. Therefore before you decide to submit an application, be sure that your credit rating is nice and clean.

Look beyond the rate of interest
The rate of interest you are able to get for a home loan is very important, however it is not the sole step to take into account. There are numerous additional service fees that could vary from lender to lender, also. Take into account the charges for settlement, the mortgage type being offered, and any points. You ought to get quotes from different financial institutions before you make any final decision.

As previously mentioned, lots of people have no idea of the very first thing in relation to obtaining a mortgage loan. It isn’t too difficult if you happen to grasp the procedure. Keep in mind these helpful hints so you can be geared up whenever you make an application for for a home mortgage.

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The Changes of Mortgage Rules Creates the Need for Brokers

toy wooden house cut out sitting next to a series of check boxesOne of the most important financial decisions that you’re going to make today is that of getting a home. To get a house today, you’re going to have to work with a financial investment that takes on many years. It’s a decision not to take lightly. With the sheer number of applicants that want a mortgage, banks and other lenders are now starting to restrict the qualifications that someone has to have in order to get a home. This can be both helpful and a hindrance to those that are trying to get a home.

The change in the qualifications a person needs to get a home has been received with mixed reviews. As Australians seek to buy property, they are starting to realize that the property market can shift wildly depending on several factors, including their income and buying power. To fully understand this, and the changes, it’s imperative to consider a few notes in regard to the rules and regulations that seem to be calling for more experienced brokers overall.

Factors at Play
The first thing that you need to realize about purchasing a home is that there are a lot of different factors at play when you apply for a mortgage. Whenever a person seeks to get a loan, the broker has to consider a great deal of elements, including financial history, current employment records, affordability and other risk factors that aren’t always seen by individuals.

Purchasing a home should not be taken lightly, and therefore brokers are now putting in a lot more scrutiny to figure out just how qualified a person is before they give such a large sum to them for a home purchase. With the changes by the federal government causing a disruption in long term mortgage handling, individuals have to understand that there’s no “yes or no” scenario here, as a lot of elements have to weighed out.

Why Mortgage Brokers?
For consumers that aren’t certain that they want to deal with brokers, it’s imperative to realize that they are going to help smooth over the lending process. Mortgage brokers today help consumers figure out what loan type is best for their specific needs. It seems like this can be difficult at first, but you’ll find that brokers are trained to isolate risk factors and help people get the home they want, without breaking the proverbial bank.

A mortgage broker will sit down with a consumer, and they’ll discuss assets, price points, income, self-employment elements, and so much more. They’ll tailor a solution that meets the needs of the consumer, and not just approve a dollar amount. This is better than just asking for a set amount, and hoping for the best. The broker is trained to help meet the needs of the consumer, simple as that.

The Cost of a Broker
People assume that getting help in financial matters means that you’re going to have to pay someone a fee up front. That’s not the case inman's hand writing mortgage broker in light blue texta on reverse glass relationship to mortgage lending. In fact, you’ll find that there are plenty of free services that you can work with, especially if you want to get the advice of a mortgage broker about lending and more.

Mortgage brokers are in the business of connecting people with lending opportunities that they can afford, so that they can purchase the home of their dreams. They can help with focusing on mortgage rates, and price points that are not going to cripple the finances of any one individual. It’s a positive push forward.

First time homebuyers will delight in knowing that someone will help navigate the road of purchasing a home today. Purchasing a house is not a transaction that works the same like buying anything else. You’ll find that you’ll need to work through a variety of elements if you are to get the right home for your family. A broker can answer questions, and explore solutions that are going to help make this a bit easier to manage.

Dealing with Mortgage Brokers
man with black felt pen writing who, how, what etc on a white boardFor those that haven’t dealt with a broker or the new rules that are in place for mortgage lending, consider asking questions. Write down questions beforehand, and get ready to ask questions that you are not sure about. Do not feel that any question is off limits, or “dumb”. There are no dumb questions here, because you’re dealing with a loan amount that could take you decades to pay off. Do not resist asking questions, it’s that simple.

The mortgage broker that you use will not simply help you get your mortgage, mind you. They will help you understand any changes and updates that come through the marketplace after the fact. If there’s a change, problem, or new legislation, you’ll hear from the broker that helped you, so that you know what you’re dealing with. Buying a home is not something that is easy to get done on your own, and brokers know this, which is why they build a relationship with clients to help navigate the real estate market appropriately.

Your mortgage professional is in charge of staying abreast with all the latest news, views, and updates. They help navigate the real estate world, mortgages, financial matters, and any abrupt changes that the Reserve Bank of Australia may end up moving forward with.

Be Patient
At the end of the day, the best tip that you can take with you today is simple, be patient. That’s right, be patient with your mortgage lending and investigation. You may have found your dream home, but don’t assume that the transaction will be open and closed within a short span. Get a professional mortgage broker to help you gain access to the bigger picture, and you’ll end up with a positive push forward.

Home buying takes time, but so does the lending solution. If you rush things, or try to avoid using a broker, you may find yourself with a mortgage that is too hard to pay off, or rates that are not favorable for you at all. Take your time, ask questions, and get a good broker on your side.

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Are You Mortgage Smart, Or Just Another One Of The Banks Sheep?

How did we get into this Mess Anyway?

man clutches his head in panic as stock market crashesIt’s been over eight years (how time flies) since the Global Financial Crisis made its presence felt. Initially Australia looked like it was going to be immune to its effects, or so a lot of people thought. However, we all now know that’s not the real world we live in. The real world we’re now living in here in Australia is a world that has been economically affected by the financial status of the countries we trade with.

In simplistic terms if people in America aren’t buying new houses then they’re also not buying all the furnishings that go with those houses, such as white goods etc. If they’re not buying those then manufacturers are not making them. I think you get the gist of what I’m trying to say.

If people in first world countries are not buying, then the economies of manufacturing countries like China, Japan and India go backwards. When they start going backwards they stop buying coal and other resources like iron ore.

Why Have the Banks Been Immune to all of this?

That’s why we had a two speed economy that everyone marveledcartoon of greedy banking grabbing lots of bank notes at. Fast and average were the two speeds we had. What we have currently is average and slow. Now the mining boom is over for the time being our economy is going to continue to struggle until the global economy starts to hum again.

It seems the only industry that is not bemoaning its fate is the banking industry in Australia. They continue to make record profits off of the back of hard working Australians. The four major banks in Australia continue to make record profits year after year.

Even though the Government outlawed exit fees on home loans, lenders have come up with new and innovative ways to ensure that their profits continue to increase. These strategies include increasing interest rates out of sync. This means, when the Reserve Bank of Australia’s (RBA) rate increases, the banks have in some instances increased their rates even more and also have not been passing on all of the rate cuts when announced to maintaining ridiculously high credit card interest rates.

When does the Rip Off Stop?

Their ongoing justification for this outrageous profit plundering is that Australia needs a profitable banking system to maintain a strong balanced economy. Well, how much is enough? When does this flagrant profit gouging stop.

At the moment the Federal Government has been a running a ‘Show Tribunal’. They lined up the boss’s of the big four banks and then fired some tepid questions at them, which made a couple of them squirm uncomfortably a little bit in their seats. What’s going to come out of that, not much? We may see one or two minor concessions, but that won’t slow the banks profit increases down.

What can You do About it?

Unlock your potential sign in rainbow coloursUnless we take personal responsibility for our own finances, we are always going to be stressed out with the banking system and trying to pay off our mortgages.

In the current market interest rates are at an all time low and some economists are predicting they could even go lower. Some say as soon as next month. In this financial environment it behooves anyone who wants to get ahead financially to start working their finances a lot smarter.

The principal and interest repayments on a 3.64% (yes you can get an owner occupied home loan (<80% LVR) with an offset account at 3.64%) $500,000 30 year owner occupied home loan are $2,284 a month. We all know that the majority of that repayment amount for the first 15 years is going to go to the bank in interest. Did you also know that over the last 30-40 years home loan interest rates have averaged around 7.5% to 8.5%? Many current older home owners will remember back to the late eighties and early nineties when home loan rates were 17.5 – 19.5%.

Which Would You Prefer – pay Yourself or Pay the Bank?

So, what I’m saying is home loan rates will inevitably raise again. However, when they get to 7.64% the majority of that payment will be going to the bank. If you allow that to happen, you will always be at the beck and call of the banks.

What we’re suggesting is that you tighten your mortgage belt, get the budget spreadsheet out and (I know, it’s a pain, but there is no other way) start figuring out how you can fit a 7.5% principal and interest mortgage repayment into your budget.

A 7.5% principal and interest mortgage repayment on a $500,000 home loan would amount to $3,578 a month. Yes that’s about $1,200 a month more than you’re paying now. The real decision is, do you pay yourself now or pay the bank later?

Because, inevitably interest rates will rise and when they do you will be forced to pay those amounts. Notwithstanding when it does most of the repayment will be going into the banks back pocket.

How Well Could You do?

The good news is, if you do activate this strategy you will pay your thirty year mortgage off in 15 years and two months. In other words youStep out of your comfort zone sign would lop off an enormous 14 years and two months off your 30 year mortgage and in the process save an astounding potential $170,986 in interest.

Imagine, if fifteen years from now you didn’t have a mortgage as opposed to being locked into the bank for the rest of your life. The choice is, you either pay now or you pay later.

There’s an old saying that says ‘You Should Never Look A Gift Horse In The Mouth’. What does that mean, I really don’t know. I think it has something to do with not being ungrateful when you’re handed a gift.

Nonetheless, the point is interest rates are at historic lows which provides an opportunity that may never been seen again. Or, if it does come again it will probably be a long time coming.

If you want information on more strategies that will help you pay your mortgage off faster or to create more wealth through mortgages and property, please get in contact.

If you don’t have a 3 in front of your owner occupied home loan interest rate these days, then you’re paying too much for your home loan.

Bio:
About About Dave Fleming

Dave is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Dave is the webmaster at www.mastermortgagebrokersydney.com.au, which is an information website pertaining to loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.

Refinancing Info Page

First Home Buyer Tips

So, are you looking to buy your first home?

This can be a major step for anybody, and you will find quite a few things to consider, not the very least of these is the way to get the funds for a house. Sure, there are lending options readily available for property purchases; however you will need to have some money on hand to pay for a deposit, also there are other costs, which include fees and settlement costs that you may not be able to get included in a borrowing arrangement.

How Much Money do You Have to Start?

First home buyers signIf you’re like a lot of first home buyers who are looking to purchase using a low deposit home loan you will still need to do your sums to calculate how much cash you will need. Most lenders who provide low deposit home loans want to see that you have at least 5% in genuine savings. What does this mean? It means you will be able to demonstrate that you have saved 5% of the purchase price over a 3 month period. Or, you have had that amount of funds in a savings account in your name for at least 3 months.

Basically they want to know if you have fiscal discipline and a sense of responsibility. In addition, if you’re buying an established property you will also have to prove to them that you have enough additional funds to complete the purchase transaction. This means you will need enough extra cash to pay for purchase stamp duty and legal costs.

Are You Eligible for Government Concessions?

If you’re purchasing a new home that nobody’s ever lived in before you might be eligible for first home buyer concessions. If you fit into that category you should check with your local states Office of State Revenue for any programs they may have.

So, what are some methods the everyday Australian can use to get hold of some funds to cover the dollar amounts required to purchase a home?

Cash Generating Tips

Happy couple holding baby in front of sold houseIf you are planning to get a property inside of 12 months you will want a savings strategy that’s going to yield immediate results. Saving cash is usually a complicated challenge if you only have a preset amount of disposable income on a month to month basis. A Second employment opportunity could be a possible option for generating fast savings.

Investigating other cash flow scenarios including a cash value insurance policy might help put some cash together. However, be mindful that withdrawal penalties could be applied, nonetheless it may be well worth the expense to get your first home.

Additional ways to pull together cash include things like selling off valuable items on the net or with a garage sale. Spare cars, stocks and shares, collectables, along with other things that have got a good value can easily generate big returns.

Some lenders will allow a gift from the borrowers parents as long as the parents are prepared to put in writing that the money is a gift and non-refundable.

Longer Range Planning Strategies

Home for sale with signShould you be concentrating on a long range strategy you naturally will have much more time to accumulate the required funds. Investing more money into a term deposit or perhaps a cash value insurance plan may help keep hold of the funds for your new home.

Starting a savings bank account can certainly help ensure that the financial resources are readily available and generating interest along the way.

An additional second job would still be another possibility, but if you have the luxury of much more time to save you would then have the luxury of having to work a lesser number of hours.

Starting a home based business would provide a flexible alternative for generating extra cash flow. Nevertheless, choose wisely in finding a business enterprise that is both rewarding and legit.

Tithing is an Oldie but a Goodie

It takes a smart person to make money, however it takes an even smarter person to hang onto it. In today’s society most people are so busy paying everyone else, there is never any money left over to pay themselves. To reverse this habit a person needs to sit down and map out a budget of their expenses. Once that has been done, whittle those expenses down until there is a cash surplus left over each month.

A worthy goal is to aim at saving a minimum of 10% of your net income each month. In other words, before you pay anyone else you pay yourself 10% right off the top. Then, you figure out how to manage your lifestyle so you can live on the 90% that is left over.

The purchase of a home is a sizable, but very worthwhile step, create a workable plan for getting the money together that you need and then stick to the plan through thick and thin.

Bio:
About About Dave Fleming

Dave is enthusiastic and fascinated by the digital and social media worlds. He is passionate and enjoys entrepreneurial pursuits, wealth creation financial strategies, health, fitness as well as cooking. Dave is the webmaster at www.mastermortgagebrokersydney.com.au, which is an information website pertaining to loans. He has a deep commitment towards writing about and helping people understand the basics of how the financial world works.

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